Kashmir's Lack of Fiscal Discipline Has Consequences

It is the same old story - non-performer J&K govt penalised

Centre Refuses Rs.1300 Cr Power Reform Grant

Syed Junaid Hashmi (Kashmir Times)

Jammu: Dejected over state’s financial indiscipline, mismanagement
and routine diversion of funds, centre has again refused to extend another
Rs. 1300 crore power reforms grant to cash starved Jammu and Kashmir.
Despite routine assurances and pledges of the state government, sources said that centre refused to accede to the request and directed the state to cite credible reasons for being unable to bring even 20 to 25 percent reforms in the power sector after spending Rs.3900 crore on reforms during the last three financial
years. They added that state has been told categorically to meet expenses on power reforms on their own.

Jammu and Kashmir government was given first power reform grant of Rs 1,300 crore
during the financial year 2006-07 and was promised that it will continue for the next three financial years, during which period the state promised union government that it would undertake mandatory
power reforms. Jammu and
Kashmir got the grant without
any hassle for the first two
financial years i.e. 2006-07 and
2007-08.
The real drama began in the
year 2008-09 when Planning
Commission of India (PCI)
expressed displeasure over
state’s staggered pace in bringing
reforms in power sector.
According to sources,
Commission was also dismayed
over reported diversion
of power reform grant for paying
salaries and meeting other
general budget expenses.
Taking note of this grave
mismanagement and diversion,
grant was stopped temporarily
but later an amount of
Rs.1030 was released for the
year 2008-09 after the then
Chief Minister Ghulam Nabi
Azad took up the issue with
Prime Minister Manmohan
Singh. The balance of third
grant i.e. Rs.270 crore was
released for the financial year
2009-10.
However, no fresh power
reform grant was extended
during the last financial year
and similar is the situation
during current financial year
2010-11. Although, the plan is
yet to be approved, but sources
have confirmed that it would
be miraculous if the state gets
this crucial grant. The disinclination
has its roots in state’s
non-performance in undertaking
requisite power reforms.
Centre was surprised to note
that despite repeated assurances,
state bluffed to it and
it’s performance vis-à-vis five
major sections of power
reforms was dissatisfactory
and below the mark. These
sections included improving
financial viability of state
power utilities, reducing power
purchase bills, reduction of
transmission and distribution
losses, installation of feeder
and consumer meters, improving
customer satisfaction and
increasing the annual revenue
of the power development
department (PDD).
They noted with concern
that despite being given
Rs.3900 for power reforms in
last four financial years, state
was still facing serious problems
of old worn-out and poor
distribution network leading
to frequent outages, skewed
tariff structure, huge transmission
and distribution
(T&D) losses largely due to
outright theft and unmetered
supply, high LT/HT line ratio,
overloaded DT/Lines, lack of accountability at feeder level and in distribution setup.
Sources said that state has been advised to either
adhere to strict financial discipline or else, there are all
possibilities of Planning
Commission further tightening lid over the resources
being pooled into cash starved Jammu and Kashmir
under various centrally sponsored schemes for both
power and other sectors.
Commissioner/SecretaryPlanning B.B.Vyas, however,
maintained that state would make another effort to
secure this grant.
It needs to be mentioned here that according to
recent order of State Electricity Regulatory
Commission (SERC), the actual transmission and distribution
(T&D) losses for financial year 2007-08 and
2008-09 were 61.90 percent and 61.31 percent respectively
while for 2009-10; the T&D losses were estimated
to be 65.78 percent. SERC has said that for 2010-11,
T&D losses are projected to decline approximately by
6.80 percent and come down to 58.98 percent.
Besides, according to Economic Survey for the year
2010-11, if Jammu and Kashmir was to meet entire
demand for power, the purchase of power alone would
on current rates be in the range of Rs 2,500 crore. With
recoveries of Rs 1200 crore, the survey says that state
is facing a revenue deficit of Rs.1300 crore.
Jammu and Kashmir faces peak shortage of 11.4 per
cent (150 mw)against the all-India average peak shortage
of 11.7 per cent. The demand in the state peaks
during winters on account of large heating loads.
Government is contemplating privatisation of power
distribution in the state with chief minister Omar
Abdullah asking the power development department
(PDD) to study models of privatisation of power distribution
and come out with a concrete proposal that can
be discussed in the cabinet.
An electricity bill has already been passed besides
State Electricity Regulatory Commission (SERC) has
also been made functional.